Beware Interim Lien Waivers!


The North Carolina Court of Appeals recently restored order to the use of interim lien waivers in North Carolina. The Court of Appeals issued its opinion in Wachovia Bank N.A. v. Superior Constr. Corp., COA10-1158, on July 19, 2011. Eric Biesecker, Richard Wilson, and David Luzum of Nexsen Pruet, PLLC, filed an amicus curiae brief on behalf of the American Subcontractors Association and ASA of the Carolinas.

Superior Construction was the general contractor for a large condominium project on Oak Island. Superior started its work on April 22, 2005, several weeks before Wachovia recorded its deed of trust on the property. Later, though, Superior signed an interim lien waiver that released Superior’s lien rights "on account of any labor performed or [materials furnished] up to and including” May 31, 2005. In 2007, Superior stopped work and filed a claim of lien when the owner failed to pay $1,286,000.00. The owner also failed to pay its obligations to Wachovia. In the ensuing litigation, Wachovia and Superior fought over who had the better claim to the property.

Wachovia filed a declaratory judgment action seeking a determination that its deed of trust had priority over Superior’s lien. North Carolina’s lien statutes explicitly grant contractors and subcontractors the right to have their lien priorities relate back to the date of first furnishing of labor or materials. Even though Superior’s lien waiver contained no language addressing the priority of its lien for later-furnished labor or materials, the Business Court held that Superior’s interim lien waiver released Superior’s right to have its lien relate back to its first furnish date. Consequently, the Business Court held that Wachovia’s deed of trust trumped Superior’s lien rights.

Please see full article below for more information.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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